The Indian rupee ended marginally higher on Wednesday, aided by a slight uptick in the offshore Chinese yuan and a pullback in the dollar index.The rupee ended at 83.1225 against the U.S. dollar, compared with its close at 83.15 in the previous session.The dollar index was down 0.4% at 103.07, while most Asian currencies weakened. The offshore Chinese yuan was up 0.1% after the country’s central bank said it would cut the amount of cash that banks must hold as reserves to shore up the economy.
It’s a “bit of a confused market with not much directional conviction on either side,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors, referring to the rupee’s subdued moves in recent sessions.Since hitting an over-four-month peak of 82.77 on Jan. 15, the currency has weakened to hover between 83.0575 and 83.18 over the last week, pressured by equity-related outflows and the paring of expectations of aggressive U.S. rate cuts.
Investors are nearly split down the middle on whether the Federal Reserve will cut rates at its March policy meeting, a notable shift from odds of over 75% in late December, according to CME’s FedWatch tool.The rupee is unlikely to see sharp moves on either side ahead of the Fed’s policy decision later this month, a foreign exchange trader at a foreign bank said. Market participants widely expect the Fed to keep rates unchanged at the meeting.
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“Even then, I doubt it’ll move much unless the Fed is surprisingly hawkish or dovish,” the trader added.Heading into the Fed meeting, investors will keep an eye on U.S. GDP data due on Thursday and the closely watched core personal consumption expenditure (PCE) inflation data due on Friday.
